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The prize is awarded in the following four areas, with the precise subfields changing from year to year in a cycle of 4 to 7 years, except for the last area, which is awarded annually:

the humanities, social sciences, and Jewish studies

the natural and exact sciences

culture, arts, communication and sports

lifetime achievement and exceptional contribution to the nation (since 1972)

The recipients of the prize are Israeli citizens or organizations who have displayed excellence in their field(s), or have contributed strongly to Israeli culture. The winners are selected by committees of judges, who pass on their recommendations to the Minister of Education. Prize winners are elected by ad-hoc committees, appointed by the minister of education for each category each year. Decisions of the committee must be unanimous. The prize money was NIS 75,000 as of 2008.

On occasion, the committee has been criticized for failing to award the prize to a specific individual. For example, many have expressed criticism (or regret) that the poet Natan Yonatan never received the prize.[verification needed]

In other cases, the recipients were reluctant to retrieve the prize. These include Prime Minister David Ben-Gurion and performer Uri Zohar. In 2003, artist Moshe Gershoni informed the press that he will not shake the hands of the prime minister and education minister, and in return his prize was annulled.[citation needed]

In February 2015, Prime Minister Benyamin Netanyahu vetoed the appointment of two members of the selection panel for the Israel Prize in Literature after they had already started their work, prompting the other three members, including Ziva Ben-Porat, to resign in protest.[4] Netanyahu explained that the two panel members were politically unsuitable and that "[t]oo often, it seemed that the extreme panel members were bestowing the prizes on their friends".[5] One of the candidates for the prize, Yigal Schwartz of the Ben-Gurion University of the Negev withdrew his nomination and called on other candidates to do the same, writing that the situation was an "unprecedented scandal", and that the action was a "continuation of Prime Minister Netanyahu’s deliberate policy of undermining Israel’s elites to gain votes from other groups."[5] Over the next few days, members of the committees for the literary research and film prizes also resigned, leaving only two members from the original 13 of the three committees, and many other candidates for the prizes withdrew their nominations.[6]David Grossman withdrew his candidature with the explanation that "Netanyahu's move is a cynical and destructive ploy that violates the freedom of spirit, thought and creativity of Israel, and I refuse to cooperate with it".[6]